State Pension triple lock to be restored next year

While regular workers face real terms pay cuts, the restoration of the triple lock means pensioners will see a healthy hike to their weekly payments.

Inflation is a big worry for all of us. Just today (22 June), the Office for National Statistics (ONS) published the latest inflation data, revealing that it has now hit 9.1%.

That’s the highest rate registered since 1982.

The impact of inflation of course is that our incomes struggle to keep up with the rate at which prices are rising, leaving us materially worse off.

That is unless we manage to secure a pay rise that matches, or even exceeds, inflation. For most of us, asking our bosses for a pay hike of 10% is going to be a short conversation.

However, if you have already reached pension age then you may have better prospects of an inflation-beating income boost as the triple lock will be returning in its original form for next year.

How much the State Pension pays in 2022/23

Return of the triple lock

Confirmation of the return of the full triple lock appears to come in the form of a written answer from Simon Clarke, chief secretary to the Treasury.

Janet Daby, a Labour MP, had written to the Treasury to establish whether additional measures would be introduced to support pensioners during the cost of living crisis.

In response, Clarke detailed the support packages already announced ‒ things like the £400 grants towards energy bills in October and an additional Winter Fuel Payment for those eligible ‒ before then touching on the State Pension.

Clarke said: “Next year, the triple lock will apply for the State Pension.

"Subject to the Secretary of State’s review, pensions and other benefits will be uprated by this September’s CPI which, on current forecasts, is likely to be significantly higher than the forecast inflation rate for 2023/24.”

That seems a pretty clear statement that the change to the triple lock this year really was only temporary.

How the triple lock changed

At this point, it’s worth revisiting how the triple lock works, and what was different about it this year.

The triple lock was introduced back in the days of the Coalition and was designed to ensure that pensioner incomes increased with inflation. It means that each and every year the State Pension will be increased by whichever is the larger of the following three figures:

• The rate of inflation
• The rate of wage growth
• 2.5%

In other words, every year the State Pension will increase by at least 2.5%.

However, the last couple of years have been particularly out of the ordinary. The lockdowns of the first year of Covid and the furlough scheme meant that wages dropped, but then as things recovered last year the official rate of wage growth was artificially high.

It meant that under the terms of the triple lock the State Pension would have jumped by 7.3%, the rate of wage growth.

The Government determined that such a jump was unsustainable, so moved to temporarily remove the earnings link. In effect, the triple lock became the double lock, which is why the State Pension rose by 3.1% in line with inflation in the year up to September 2021.

It meant that those on the full New State Pension saw their weekly payments move from £179.60 to £185.15, which equates to almost an extra £300 a year.

State Pension: 5 mistakes that impact how much you get paid

A question of fairness

Obviously, the fact that the triple lock will be working in its intended form is good news for pensioners. 

The prospect of a meaty increase to the State Pension will go a long way during the cost of living crisis, particularly given that pensioners are not a homogenous group ‒ while some are sitting on significant property wealth, there are plenty of older people who are scrimping to get by.

But there is a question of fairness here that needs to be addressed.

At a time when working people are under incredible pressure, and even being told by the Bank of England that it is in effect their duty not to ask for a pay rise given the inflation situation, it is somewhat incredible that pensioners are in line for such an enormous pay increase.

It would be awfully cynical of me to point out that older people are historically more likely to vote, and so it may be in the interest of a struggling governing party to support measures that boost their lot at the expense of younger people who perhaps are not such consistent presences at the ballot box.

Yet the fact remains that while the bulk of the country will be trying to work out where to make savings and how to make their existing income stretch further, one particular demographic is in line for a significant pay jump.

Everything you need to know about pensions